Apart from other substantial features and changes, like Deferred Render, Beast Lighmapping technology, Umbra Occlusion Culling and Unified Editor, Unity 3.0 also includes updated physics engine, based on recent version of PhysX SDK.

Physics Improvements:

Upgraded PhysX to 2.8.3.

Cloth and clothing simulation: use the new InteractiveCloth, SkinnedCloth and ClothRenderer components.

New in Unity 3 are two kinds of cloth: Fully physically simulated cloth effects that interact fully with the rest of the environment. The other, Skinned Cloth, is an optimized solution for garments on animated characters.

You can use it for animated shirts, trousers, skirts, capes and hair in a physically accurate way. It is highly optimized and can handle high poly animated cloth pieces.

Layer based ignore collisions: use the Physics inspector or Physics.IgnoreCollision().

Continuous collision detection, to make sure that fast moving colliders will not pass through other colliders. See Collider.collisionDetectionMode.